Hiring an 18- to 20-year-old will cost employers nearly £5,000 more by 2027

The annual cost of employing a full-time 18- to 20-year-old on the minimum wage will reach £20,511 from April 2027, up from £15,652 in 2024 — an increase of £4,859, or 31%, in three years, according to the Centre for Policy Studies (CPS). The figures land as 981,000 people aged 16 to 24 in Britain — roughly one in eight — are not in employment, education or training, according to ONS data.

What is driving the increase?

The rise stems from the minimum wage, not from National Insurance. Chancellor John Healey confirmed another increase this week, with new rates taking effect from April 2027. Workers aged 21 and over will see their legal minimum hourly pay rise by 3.9%, to £13.21. For 18- to 20-year-olds, the rate climbs from £10.85 to £11.27 — an extra 42p an hour.

Employers pay no National Insurance on under-21s' earnings below £50,270 a year, so youth hiring costs track the wage floor directly. Older minimum-wage workers, by contrast, can attract employer contributions.

Daniel Herring, the CPS's Head of Fiscal and Economic Policy, said: "John Healey deserves some credit for slowing the rise in the youth minimum wage. However, this Labour government has continued to increase pressure on businesses during an incredibly difficult period for them."

Herring added: "This week's announcement of an increase follows a decade of above-inflation rises in the cost of employing someone on the minimum wage. Since 2024, the cost has increased by 20%, while inflation has been just 10% over that period."

Who else gets more expensive?

The think tank's numbers extend beyond young recruits:

• A full-time minimum-wage worker aged 21 and over will cost £26,900 a year from April 2027 — £4,462 more than in 2024.
• The annual bill for an apprentice will climb by £3,476, to £15,124, over the same period.
• Britain now has the seventh-highest minimum wage relative to median earnings among OECD countries with a statutory minimum, the CPS calculates.

Frozen income tax thresholds add a second squeeze. A full-time minimum-wage earner's annual pay now sits at around half the level at which higher-rate income tax begins, compared with roughly a fifth in 2000. Minimum-wage work, in other words, is moving closer to the higher-rate band.

What does this mean for young jobseekers?

For an individual 18-year-old, the arithmetic is double-edged. The wage floor guarantees more gross pay — 42p an hour more from April 2027 — but the CPS warns that making staff more expensive risks shutting people out of work. The think tank argues that rising employment costs help explain falling vacancies and higher unemployment, a claim that sits uneasily alongside the 981,000 young people already outside work, education or training.

The figures also feed into a wider campaign context: The Sun has launched what it calls its Jobs Army campaign, urging businesses large and small to offer work shadowing and experience to first-time jobseekers.

What the CPS numbers do not say is how much of the cost increase employers will absorb through pricing, margins or reduced hours rather than headcount. That question, and the vacancy data that will answer it, becomes testable from April 2027, when the new rates — and the £20,511 annual bill — take effect.

By Sophie Lindqvist